RBI MPC 2025: Repo cut to 6%, accommodative stance for growth

The policy pivot investors were watching

The Reserve Bank of India (RBI) delivered a widely expected rate cut in its first monetary policy review for FY26, signalling a stronger focus on supporting growth as inflation shows signs of easing. The Monetary Policy Committee (MPC) voted unanimously to reduce the policy repo rate by 25 basis points. The move takes the repo rate to 6% from 6.25% earlier, with immediate effect.

Alongside the rate cut, the RBI changed its policy stance from “neutral” to “accommodative”. Governor Sanjay Malhotra presented the MPC resolution and also outlined a set of regulatory and operational initiatives spanning stressed asset securitisation, co-lending, gold loan rules, UPI limits, and a regulatory sandbox.

Repo rate cut: what the MPC decided

The MPC’s decision lowers the benchmark policy rate to 6.00%. The vote was unanimous, underscoring alignment within the committee on the need to recalibrate monetary conditions.

This is the second straight 25 bps cut. The RBI had reduced the repo rate in February, marking the first cut in about five years at that time. In the February meeting, the MPC unanimously lowered the repo rate by 25 basis points from 6.5% to 6.25%, while maintaining a “neutral” stance.

With the latest action, the policy rate is now 50 bps lower than the pre-February level, and the stance has moved to accommodative.

SDF, MSF and bank rate: corridor adjustments

Following the repo rate cut, the RBI also adjusted key operating rates under the liquidity adjustment framework. The Standing Deposit Facility (SDF) rate was revised to 5.75%. The Marginal Standing Facility (MSF) rate and the bank rate were adjusted to 6.25%.

These corridor changes matter for money market rates, as they help anchor overnight funding costs and influence the transmission of policy changes through the banking system.

A market participant view cited in the coverage, from JM Financial Asset Management’s Senior Fund Manager (Debt) Killol Pandya, also highlighted these levels: repo at 6.00%, SDF at 5.75% and MSF at 6.25%.

Stance shift: from “neutral” to “accommodative”

The RBI’s stance change from “neutral” to “accommodative” signals that the central bank is prioritising growth support in its policy guidance. The MPC’s stance decision was also unanimous.

While a rate cut affects borrowing costs directly over time, the stance is a forward signal to markets about the RBI’s reaction function. In this case, the shift suggests a readiness to keep financial conditions supportive if the macroeconomic outlook warrants it.

The policy communication linked the stance change to the evolving macroeconomic situation, with inflation dynamics and growth considerations in focus.

FY26 macro projections: growth at 6.5%, inflation at 4%

Governor Malhotra outlined the RBI’s projections for FY26, estimating GDP growth at 6.5% and inflation at 4%. The GDP growth projection included quarterly estimates: Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6% and Q4 at 6.3%.

These projections provide context for the RBI’s decision to lower rates and adopt an accommodative stance. The combination of easing inflation and rising growth concerns was cited in the report as a key backdrop for the pivot.

Measures beyond rates: securitisation, co-lending, gold loans and UPI

The policy package also included several non-rate measures announced by the Governor:

• New steps on stressed asset securitisation
• Expanded co-lending
• Unified gold loan norms
• Broader UPI limits
• A theme-neutral regulatory sandbox

These initiatives indicate the RBI’s intent to work on transmission, credit availability, and innovation-related regulation alongside headline interest rate decisions.

What it means for borrowers and EMIs

A reduction in the repo rate can translate into lower borrowing costs for consumers and businesses, particularly for loans linked to external benchmarks. The coverage explicitly noted that EMIs are expected to come down following the repo rate cut.

However, actual pass-through depends on how banks adjust their lending rates and how quickly they reflect changes in funding conditions. The corridor rates and the stance also play a role in shaping short-term money market conditions, which influence banks’ marginal cost of funds.

For retail borrowers, the most immediate attention typically remains on home loans and other floating-rate products that reference repo-linked benchmarks.

Market impact and policy transmission: the key moving parts

The decision was described as being in line with market expectations, which often matters for how bond yields, bank stocks, and rate-sensitive sectors react around the announcement. With the rate cut being anticipated, the focus typically shifts to the stance, forecasts, and operational measures that influence future policy and liquidity conditions.

The stance change to accommodative is an important signal for debt markets because it can shape expectations for the future path of policy rates. At the same time, RBI projections for growth and inflation become central inputs for analysts assessing how much space exists for further easing.

Rupee and external sector: Governor’s reassurance

The report noted that Governor Sanjay Malhotra dismissed concerns on the rupee and said he was comfortable on the external sector. This comment matters because currency stability and external balances often influence the RBI’s room to manoeuvre on rates, especially when global financial conditions are uncertain.

By indicating comfort on the external sector while cutting rates, the RBI is signalling that it does not see near-term external vulnerability as a binding constraint for the policy action communicated in this meeting.

Key numbers at a glance

Conclusion: a clearer tilt towards growth support

The RBI’s FY26 policy review delivered a 25 bps repo cut to 6% and a unanimous shift in stance to accommodative, alongside updated macro projections and a set of regulatory measures. The immediate focus for markets and borrowers will be on how quickly banks transmit the cut into lending rates and on how the RBI’s inflation and growth projections evolve.

The next steps will likely hinge on incoming data and subsequent MPC communications, especially around the durability of disinflation and the strength of growth conditions reflected in the quarterly trajectory outlined for FY26.